Tue | Apr 7, 2020

Testy EU budget talks blocked, new summit in March likely

Published:Sunday | February 23, 2020 | 12:19 AM
Police vehicles are parked outside an EU summit in the European Quarter of Brussels, Friday, February 21, 2020.
Police vehicles are parked outside an EU summit in the European Quarter of Brussels, Friday, February 21, 2020.

Major contributors to the European Union’s budget blocked progress at an emergency summit on Friday, insisting that they would not stump up more funds for the bloc’s next long-term spending package, worth around €1 trillion (US$1.1 trillion).

The so-called “Frugal Four” of Austria, Denmark, the Netherlands and Sweden believe the EU’s 2021-2027 budget, which is meant to fund ambitious climate change and digital economy policies, should amount to 1% of the 27-nation trading bloc’s gross national income.

EU Council President Charles Michel, who met with EU leaders throughout the night trying to broker a compromise, has tabled a draft budget of 1.074% of GNI. The European Parliament wants an ambitious 1.3%, while the EU’s powerful executive arm, the European Commission, prefers 1.11%.

“I can understand that when you’re a prime minister in a country that has poor regions, infrastructures, I can understand that … but when it comes to the percentage, I stand firm,” Danish Prime Minister Mette Frederiksen told reporters in Brussels on Friday.

Asked whether the stand-off can be resolved, Frederiksen said “no, I don’t think so. I’m willing to stay, and I’m prepared to stay the whole weekend. But no, I don’t think we’re going to reach an agreement.”

She said that another summit would be required, probably in early March.

As he left European Union headquarters in the wee hours of Friday morning, Dutch Prime Minister Mark Rutte told reporters: “I’m going to bed.”

Rutte departed with a biography of Chopin tucked under his arm – a prop to suggest that he would probably be reading rather than talking about softening his position.

Broadly speaking, the “Frugal Four” with the backing of Germany are lined up against the “Friends of Cohesion,” a group of mainly central and eastern European nations who want to see the continued flow of “cohesion funds” – money earmarked to help develop poorer regions.

“If we want to find an agreement, I think everybody has to be flexible. It cannot be the way that one or some countries try to dictate the outcome,” said Finnish Prime Minister Sanna Marin. Asked about the chances of a breakthrough, she said: “It looks quite difficult, the situation.”

Luxembourg Prime Minister Xavier Bettel rejected any talk of failure but said that “if everybody just calculates what he pays and what he gets then we will never come out.”

Bettel underlined the importance of focusing on the advantages that the EU brings. “In ’57 when we created Europe, we realised maybe sometimes (it’s better) to give something up or to pay something to have something bigger tomorrow.”

After a night of bilateral talks with Michel and in small groups, the leaders were set to all meet together again mid-morning Friday. But like much about this marathon money summit, nothing can be set in stone, and that timing appeared likely to slip.

Much at stake

What’s really at stake is whether the leaders are ready to put their money where their mouths are when it comes to European policy ambitions. At the same time, amid economic stagnation, they cannot afford to give the impression to their home audiences that they are splashing taxpayers’ cash.

With Britain gone from their ranks, the leaders want to prove that Europe can still forge ahead towards brighter horizons, but Brexit has left them with a sizeable budget hole – about €75 billion (US$81 billion) over seven years.

In the great scheme of things this is not a huge amount of money for the world’s biggest trading bloc. Even if a trillion euros sounds like a lot, it actually amounts to about one per cent of the gross national income of the 27 nations combined.

The budget is also made up of customs revenue and income from fines levied by the commission, and the EU’s executive arm has raked in plenty of those from antitrust cases involving tech firms and others in recent years.

So no country even pays 1% of its own GNI, and the debate is over some 0.3 percentage point.

But it’s not just about convincing reluctant member countries to stump up funds. The parliament must also ratify any final budget agreement and for the moment EU lawmakers are far from happy.

“At the moment, we remain €230 billion (US$248 billion) apart,” European Parliament President David Sassoli said last week.

AP